On January 10, 2011, the City entered into a Gift Shop Concession Agreement with Air Host Billings, Inc. (Air Host) to operate the Airport's gift shop concession in the Terminal Building.  The five-year term was set to expire on January 31, 2016, however, the Airport was in the middle of the preliminary design work for the future Terminal Expansion project, and the timing of the impacts to the concession were not immediately known.  Subsequently, on January 29, 2016, the parties agreed to continue the concession arrangement in a holdover status while the design work for the Terminal project was completed.  Now that the design plans are nearing completion and the impacts to the concession space during the construction process are known, both parties desire to amend the Agreement to extend the term through the duration of the construction.  This will allow Air Host to continue to operate the gift shop concession in an alternative space, still providing gift shop services to the general public during the construction project.  It is estimated that a Request for Proposals (RFP) will be advertised a little over a year from now so that a concessionaire will be under contract to provide input into the new gift shop concession space while it is under construction.

City Council may:

• Approve Amendment One to the Airport Gift Shop Concession Agreement; or
• Disapprove Amendment One to the Airport Gift Shop Concession Agreement.

During the phased construction of the Terminal Expansion Project, the gift shop space may be relocated several times and may be temporarily reduced in size, both of which could reduce Air Host's revenues.  The Amendment therefore also removes the Minimum Annual Guarantee (MAG) of $120,000 for each contract year.  Air Host will continue to pay the City a percentage of gross revenues, slated as 19.75% of the first $675,000 in gross revenues, and 25.00% of gross revenues over $675,000. The Airport's current annual concession revenues from the Gift Shop Concession Agreement are approximately $180,000.  This Amendment ensures that the Airport will have uninterrupted gift shop service to its customers during all phases of the Terminal Expansion Project, and also continues to receive revenue from this Concession during the Terminal Expansion project.  Revenues are projected to be 10-15% less once the construction starts in September 2019.

Staff recommends that the City Council approve Amendment One to the Gift Shop Concession Agreement extending the term for up to three additional years or until the new concession space is operational, to allow Air Host to operate the gift shop concession during the final design and construction of the Terminal Expansion Project.